If enacted into law, the bill would allow merchants to negotiate as a group the interchange fees they are charged by Visa Inc. and MasterCard Worldwide, the card brands that set fees per transaction that merchants must pay for accepting electronic payments.

The proposed legislation would only affect those card brands that have a 20 percent or higher market share in the payments industry. Presently, that means only Visa and MasterCard would be subject to interchange regulation, not Discover Financial Services or American Express Co.

Taking sides

HR 5546 was introduced on a bipartisan basis into the House on March 6, 2008, by Reps. Chris Cannon, R-Utah, and John Conyers Jr., D-Mich.

According to Conyers, the act would help "level the playing field for merchants and retailers negotiating with banks for the cost of certain fees and ultimately reduce the costs of everyday goods for consumers."

Conyers added that interchange comprises almost 90 percent of the fees card brands charge merchants each time a consumer uses a payment card.

Organizations with competing interests have lined up for and against the bill. The Merchants Payments Coalition, which represents large and small retailers nationwide, agrees with Conyers. In a May 12, 2008, statement, the MPC said, "Visa and MasterCard operate like price-fixing cartels, each one imposing oppressive credit card interchange fees and rules on merchants on a 'take-it-or-leave-it' basis.

"Credit card industry policies and practices make it practically impossible for merchants to know how much they are really paying in credit card fees, or why ... HR 5546 is the only solution that would create a competitive market outcome and bring transparency to the broken credit card market by allowing merchants a seat at the negotiating table." On the other side is the Electronic Payments Coalition, an industry-wide assembly of card networks, financial institutions and trade associations dedicated to protecting consumer value, choice and the competitive nature of the payments marketplace. In a statement issued May 15, the EPC made its position clear:

"We strongly oppose this bill, or any other bill that places price controls on this functioning free market.

The legislation's proposed panel of politically appointed bureaucrats who would 'determine rates and fees' for this highly complex and vast system could never replicate the delicate balance currently established by the free market.

"Such [a] policy would bring harm to consumers, to the community banks and credit unions that receive interchange revenue, and to the viability of the worldwide electronic payments system. Ultimately, merchants would also feel the pain of such an economic disaster - ironically, the very entities that are seeking price controls for their own financial gain."

Another big player weighs in

The National Retail Federation, which represents more than 1.6 million U.S. retailers, is staunchly behind the legislation. "If consumers knew how much they are actually paying for credit cards, most would say they aren't worth the price," said Mallory Duncan, the NRF's Senior Vice President and General Counsel, in a May 15 statement.

"There is no transparency and no negotiation under the current system," Duncan added. "This legislation would bring about true competition among the banks that issue credit cards, giving retailers the opportunity to negotiate terms on behalf of themselves and their customers that reflect the actual cost of the services provided."

Roll call

Scheduled to give testimony at the May 15 hearing were officials from the retail and financial services industries, as well as representatives from Visa and MasterCard. ISOs and merchant level salespeople can voice their opinions on this proposed legislation by going to www.electronicpaymentscoalition.org/contact.

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